Adequate and Accurate Accounting Records

HMRC has recently announced that it will be checking the accounts records of 50,000 businesses in each of the next three years, to see if the records are adequate and accurate. You could be one of those businesses. The penalties for any non-compliance they find can be up to £3,000, and there may be extra tax to pay, so you are advised to have everything in order before they come calling.

Records Can Help Your Business

This is not the only reason to make sure your ongoing accounting records are up to scratch. They are crucial for any entrepreneur to keep a handle on business affairs and financial control. Being able to know exactly how much cash has been paid in and spent means you know just how much is in the bank, and what you have to play with when making plans. It can keep you out of the red or within your arranged overdraft, so you can avoid associated hefty bank charges.

Equally important is being able to look back over your income and expenditure month by month, quarter by quarter, year by year. This helps you to identify patterns, opportunities and problems. When you know about the opportunities, you can work out how to exploit them. When you know about regular problems that are coming up, it could be easy to work out how to avoid them.

Getting Help from Bookkeepers

If you employ a bookkeeper and don't qualify for a full annual audit, you might want to have someone independent come in and check that everything is in order, show you how to identify the highs and lows and what they mean. If you use an outsourced bookkeeping service, why not schedule regular quarterly meetings to discuss the peaks and troughs, where the opportunities might lie, and what can be done about the problems, if any. Your external bookkeeping service may well have observed similar problems with other clients, and be able to use this experience to advise you.

New Year System Review

Did your New Year resolutions include sprucing up your business systems? Whether or not you feel they might need it, now is a good time to review them, when you and your staff are full of good intentions for the year ahead.

One of the ways you could approach this is to look at the different functions within the business separately, and then consider how they all fit together in the bigger picture. Everything that the functions rely on to perform efficiently and effectively must be well oiled and linked smoothly into the overall system of a profitable and developing business.

Hardware and Software

Is everything up to date and compatible? Is it all in good working order? Does it do everything that is needed at a reasonable speed? Do you have enough workstations in convenient places? Do you have enough free hard drive space? Do you and your staff find it easy to use or does it slow your productivity? Do you need to adjust your budget in this area or is there a time when you should plan to do so?

Training and Development

While you undertake the review, consider whether there are new areas in which you or your staff need to be trained. Make notes about this as you go so that arrangements can be made as soon as possible.

System Documentation

Do you have a disaster recovery plan documented and kept off-site? Have you documented all procedures so that someone else could pick up where you or your staff left off? Do you have all the written policies that your business needs?

Security Procedures

Are you confident that you have done all you can to keep your systems secure? What access controls are in place? Do you change your passwords regularly and insist that your staff do the same?

Being Your Own Internal Auditor

In a small business the owner often has to perform the role of internal auditor. You have to keep a finger on the pulse of everything that is going on. Reports from an outsourced bookkeeping service could be a really helpful element of your business systems.

Corporation Tax Changes in 2011

If you are in a limited company, or other organisation that pays corporation tax, are you on target to be ready for the new requirement to submit your company tax returns and payments on-line from this coming April? Some companies have already started doing this; others haven't yet, but from April 2011, it is mandatory.

Corporation Tax Returns

Because returns must be made within 12 months of your last accounting period, you only have to comply with this regulation this year if it ended after 31 March 2010, but it will kick in for the next one, so you need to consider when and how to plan for it if you haven't already done so. Returns must be submitted in the Inline XBRL or iXBRL format, so you will need to use HMRC free downloadable software or purchase software applications or services that produce iXBRL accounts and/or iXBRL computations.

The HMRC filing software is suitable only for SMEs with simple returns. If your tax affairs are more complicated you will need to procure commercially available software. Your outsourced bookkeepers should be able to advise you on what is appropriate for your business.

Corporation Tax Payments

The majority of companies already pay their corporation tax on-line by direct debit. This is easily the simplest way to comply, but you can choose various other methods of payment.

No changes have been made to deadlines, so your payment will be due nine months after the end of your accounting period, unless your profits for the year have reached £1.5 million, when you will be required to make four quarterly instalment payments.

Save yourself all the hassle and anxiety by taking the advice of your outsourced bookmakers. Let them make all the agreed arrangements and report to you in good time that all has been taken care of.

Business Support in 2011

Have you used a Business Link adviser? From November this year, no-one will be able to do that. The government has decided to scrap that side of the business, retaining only a new Business Link website for online information.

A government document released this month recognises the importance to the economy of small businesses, but believes that the current method of delivering support through Business Link is not effective enough. It doesn't give enough value for the public money that pays for it.

Local Support

The paper states that “the best advice for business comes from other experienced business people”. So support will still be provided locally, but by volunteers instead of paid advisers. These will be accessed online through a “Mentoring Gateway” online.

National Telephone Contact Centre

Over 20% of small businesses are believed to operate without web access. Any who can't find what they need online, will be able to get help or find out how to get it on a national telephone number.

Encouraging New Businesses

A range of other measures are planned to encourage a greater proportion of the population to become self-employed, including a continuation of the National Enterprise Allowance (NEA) for unemployed people who come off benefits to start a business. They will also provide specific support for aspiring entrepreneurs leaving military service, women and people in minority ethnic groups. And they are liaising with social housing landlords to find ways to allow and assist new home-based businesses in their premises.

Encouraging Small Business Development

Established small businesses will be selected for the Business Coaching for Growth programme, to help them achieve their potential and their development ambitions.

What About Now?

So we know about the government's plans. But 2011 is an interim year in which little of this is in place, while current support systems are dropping away. It's more important than ever to use your outside bookkeepers to help you keep up with developments and keep your business on-track.

The Importance of Cash Flow Management

Hopefully you experienced a brisk trade in December. With the increase in sales, you could find that your cash flow differs during this month compared to any other time of the year. Stay on top of your December cash flow by making sure that you follow these tips:

Stick to a Budget

With the till ringing at an increased rate and takings looking higher than expected, it is easy to get carried away and spend more than you usually would. But this could be dangerous and should be avoided. Ideally you would have already planned for this prior to the Christmas rush by drawing up - with the help of your local bookkeeper - a Christmas budget. By forecasting an increase in sales, you could have funds set aside that you know you can spend on more stock or expanding products or services if needed.

Consider Extra Expenses

At Christmas, profits should increase. But many businesses find that expenses and outgoings can also shoot up almost without warning. Paying staff for overtime, throwing Christmas parties, lost days through adverse weather conditions, increased heating and electrical usage; it all adds up. Avoid facing an eye watering bill by employing an outsourced bookkeeper, ideally all year round, to regularly check up on expenditure so they can warn of or even forecast in advance any potential problems.

Effective Invoicing

One reason cash flow becomes a problem during December is as everyone is so busy, invoices are often sent out late and, as people take time off work for the holidays, payments can become delayed for several weeks after Christmas. Make sure that you or your bookkeeper sends out invoices effectively and on time.

Outsourced bookkeepers are skilled at managing all aspects of cash flow management. By leaving it to them, the burden is removed from your shoulders, leaving you free to drive up sales as best you can before, during and after Christmas.

Business Expenses Advice for Small Businesses

There are certain times of the year when business expense claims become more common. Christmas is one such time. But what can be claimed as an expense? Are there different types of expenses? Follow this guide and you should not go far wrong:

What are Non-Taxable Expenses?

A non taxable expense is something that you or an employee buys that is for business use only. Often known as allowable expenses, these can be deducted from your end of year tax bill. But working out what can be claimed as a non taxable expense can be difficult. As a rough rule, things such as travel costs for business purposes, general running costs such as electric and phone bills, as well as premises costs such as renting an office can be claimed back. This is however by no means an exhaustive list, and from time to time it may become difficult to know whether one thing or another could be claimed back as an expense.

The best idea is to invest in a professional bookkeeper so they can keep a detailed record of all expenses you accumulate throughout the year. This way you will have a tidy and comprehensive list to present to your accountant at the end of the tax year, and then they can work out what can be reclaimed or discarded.

What can’t I claim as Expenses?

The basic rule is that you cannot claim anything that is for personal use. This means that you cannot claim your phone bill as expenses if you have used it for personal reasons. You cannot claim travel expenses on your journey to or from work, but you can claim back expenses spent visiting clients for example. Again, it is best to check with a professional to make sure you have the right to claim back what you think you are due.

Do I need to Keep a Record?

It is very important that a detailed record of all of your expenses is kept throughout the year and that it is kept up to date at all times. Everything must be recorded along with receipts and the relevant documents that prove the expense was business related.

HMRC can be very strict so it is best to use an outsourced bookkeeper to keep all of these records for you. They will know how to collate and present your expenses in a professional way and will offer you advice on what you can or cannot claim.

Make Sure your Business Can Cope at Christmas

It doesn’t take a rocket scientist to tell you that Christmas is for most businesses, both large and small, the busiest time of the year. Taking advantage of all of this increased trade is vital and the perfect way to start the New Year on a strong financial footing. In fact many businesses rely heavily on doing a roaring trade in the build up to Christmas.

Coping with the increased demand is very important otherwise there could be some serious consequences and a lot of money could be lost. But how can you ensure the Christmas rush goes as smoothly as possible?

Increase the Number of Staff

Extra demand means more hands will be needed. Employing more staff is the most obvious way to make sure there are more hands on the pump as it were. But what if you cannot afford to employ another member of staff? If this is the case, then look at ways of delegating time consuming jobs to others. A popular option is to employ an outsourced bookkeeper and pass onto them all the accounts and payroll responsibilities for a month or two. This could free you up and allow you to spend more time generating cash.

Stay on Top of Cash Flow

There is no better feeling than receiving order after order as the countdown to Christmas begins. You send out items or sell them on the shop floor at such a rate that you are forced to order more and more stock. But be careful. Just because orders are up does not mean that you can necessarily afford to buy more stock than you usually would. Staff might be working longer hours and your payroll might therefore be more than it is during the rest of the year. Before you know it you have ordered too much stock that you cannot sell, as well as facing a large payroll bill.

Avoid this scenario at all costs. Use the help of a local bookkeeper to keep on top of your cash flow management system during the Christmas rush. With this taken care of, you can get on with other important tasks with the knowledge that no nasty surprises will be waiting for you in January.

Do not make any rushed decisions. Sometimes an outsourced bookkeeper who is separate from your company is the best person to entrust with your cash flow and pay roll duties when things get busy.